{"subscriber":false,"subscribedOffers":{}} National Health Care Spending In 2019: Steady Growth For The Fourth Consecutive Year | Health Affairs

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Research Article

Costs & Spending

National Health Care Spending In 2019: Steady Growth For The Fourth Consecutive Year

Affiliations
  1. Anne B. Martin ([email protected]) is an economist in the Office of the Actuary, Centers for Medicare and Medicaid Services (CMS), in Baltimore, Maryland.
  2. Micah Hartman is a statistician in the CMS Office of the Actuary.
  3. David Lassman is a statistician in the CMS Office of the Actuary.
  4. Aaron Catlin is a deputy director in the National Health Statistics Group, CMS Office of the Actuary.
  5. The National Health Expenditure Accounts Team is recognized in the acknowledgments at the end of the article.
PUBLISHED:Free Accesshttps://doi.org/10.1377/hlthaff.2020.02022

Abstract

US health care spending increased 4.6 percent to reach $3.8 trillion in 2019, similar to the rate of growth of 4.7 percent in 2018. The share of the economy devoted to health care spending was 17.7 percent in 2019 compared with 17.6 percent in 2018. In 2019 faster growth in spending for hospital care, physician and clinical services, and retail purchases of prescription drugs—which together accounted for 61 percent of total national health spending—was offset mainly by expenditures for the net cost of health insurance, which were lower because of the suspension of the health insurance tax in 2019.

TOPICS

Health care spending in the US increased 4.6 percent to reach $3.8 trillion, or $11,582 per person, in 2019 (exhibit 1).1 This is similar to the growth rate that was experienced in 2018 (4.7 percent) and is consistent with the average annual spending growth rate of 4.5 percent that has been observed since 2016.

Exhibit 1 National health expenditures (NHE), aggregate and per capita amounts, share of gross domestic product (GDP), and annual growth, by source of funds, calendar years 2013–19

Source of funds2013a201420152016201720182019
Expenditure amount
NHE, billions$2,859.5$3,008.3$3,177.7$3,324.5$3,465.9$3,629.7$3,795.4
 Health consumption expenditures2,696.42,848.73,013.73,157.53,284.43,439.53,593.7
  Out of pocket330.4339.9353.8367.3374.5388.8406.5
  Health insurance2,021.32,155.22,293.32,405.62,506.12,633.82,752.8
   Private health insurance881.3926.9981.61,039.61,091.11,152.21,195.1
   Medicare588.9617.6647.8675.8704.7749.1799.4
   Medicaid445.2498.2542.7564.8578.2596.0613.5
    Federal256.9305.9342.7357.8360.0372.1387.5
    State and local188.4192.2200.1207.0218.2223.8226.0
   Other health insurance programsb105.9112.6121.1125.4132.1136.5144.8
  Other third-party payers and programs and public health activity344.6353.6366.6384.6403.8417.0434.4
 Investment163.1159.6164.0167.0181.5190.2201.7
Population (millions)c315.4317.8320.0322.4324.5326.1327.7
GDP, billions of dollars$16,784.9$17,527.3$18,238.3$18,745.1$19,543.0$20,611.9$21,433.2
NHE per capita$9,065$9,467$9,930$10,312$10,682$11,129$11,582
GDP per capita$53,211$55,157$56,993$58,142$60,230$63,198$65,406
Prices (2012 = 100.0)
 Chain-weighted NHE deflator101.9103.6104.2105.5106.8109.2110.4
 GDP price index101.8103.6104.6105.7107.8110.3112.3
Real spending
 NHE, billions of chained dollars$2,807$2,904$3,048$3,150$3,246$3,324$3,437
 GDP, billions of chained dollars$16,495$16,912$17,432$17,731$18,144$18,688$19,092
 NHE as percent of GDP17.017.217.417.717.717.617.7
Annual growth
NHE2.7%5.2%5.6%4.6%4.3%4.7%4.6%
 Health consumption expenditures2.95.65.84.84.04.74.5
  Out of pocket2.32.94.13.82.03.84.6
  Health insurance2.56.66.44.94.25.14.5
   Private health insurance0.45.25.95.95.05.63.7
   Medicare3.64.94.94.34.36.36.7
   Medicaid5.311.98.94.12.43.12.9
    Federal5.519.112.04.40.63.44.1
    State and local4.92.14.13.55.42.61.0
   Other health insurance programsb3.56.37.53.65.33.36.1
  Other third-party payers and programs and public health activity5.92.63.74.95.03.34.2
 Investment0.0−2.22.81.88.74.86.0
Populationc0.70.70.70.70.60.50.5
GDP, billions of dollars3.64.44.12.84.35.54.0
NHE per capita2.04.44.93.83.64.24.1
GDP per capita2.93.73.32.03.64.93.5
Prices (2012 = 100.0)
 Chain-weighted NHE deflator1.91.70.61.21.22.31.1
 GDP price index1.81.81.01.01.92.41.8
Real spending
 NHE, billions of chained dollars0.93.45.03.43.02.43.4
 GDP, billions of chained dollars1.82.53.11.72.33.02.2

SOURCE Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group; and Department of Commerce, Bureau of Economic Analysis and Census Bureau. NOTES Definitions, sources, and methods for NHE categories can be found in Centers for Medicare and Medicaid Services. National Health Expenditure Accounts: methodology paper (see note 21 in text). Numbers might not add to totals because of rounding. Percent changes are calculated from unrounded data.

aAnnual growth, 2012–13.

bIncludes health-related spending for Children’s Health Insurance Program (CHIP) Titles XIX and XXI, Department of Defense, and Department of Veterans Affairs.

cEstimates reflect the Census Bureau’s definition of resident-based population, which includes all people who usually reside in the fifty states or the District of Columbia but excludes residents living in Puerto Rico and areas under US sovereignty, members of the US Armed Forces overseas, and US citizens whose usual place of residence is outside of the US. Estimates also include a small (typically less than 0.2 percent of the population) adjustment to reflect census undercounts.

This article includes health expenditure data though 2019 and therefore does not include any of the effects of the coronavirus disease 2019 (COVID-19) pandemic on health care spending. Future reports will measure health expenditures based on the latest available data and will reflect the impacts of the pandemic on total health care spending as well as on the distribution of spending among the services, payers, and sponsors of health care.

The health care spending share of gross domestic product (GDP) was relatively stable in 2019, at 17.7 percent, compared with a 17.6 percent share in 2018, as growth in total national health expenditures (4.6 percent) was faster in 2019 than growth in nominal GDP (4.0 percent).

Although overall health care spending growth was stable in 2019, faster growth in personal health care spending was offset by a decline in the net cost of health insurance. Spending for personal health care, which includes health care goods and services, accounted for 84 percent of total health care spending in 2019 and increased 5.2 percent, a faster rate than the 4.1 percent it increased in 2018 (exhibit 2). The faster growth in personal health care spending was driven largely by accelerated spending growth for hospital care (from 4.2 percent in 2018 to 6.2 percent in 2019), retail prescription drugs (from 3.8 percent in 2018 to 5.7 percent in 2019), and physician and clinical services (from 4.0 percent in 2018 to 4.6 percent in 2019). The net cost of health insurance, which includes such nonmedical expenses as administrative costs, taxes, and underwriting gains or losses, declined 3.8 percent in 2019 largely because of a suspension of the health insurance tax, which affected the trends for private health insurance, Medicare, and Medicaid.2,3

Exhibit 2 National health expenditures (NHE) amounts and annual growth, by spending category, calendar years 2013–19

Spending category2013a201420152016201720182019
Expenditure amount
NHE, billions$2,859.5$3,008.3$3,177.7$3,324.5$3,465.9$3,629.7$3,795.4
 Health consumption expenditures2,696.42,848.73,013.73,157.53,284.43,439.53,593.7
  Personal health care2,409.12,533.62,686.22,813.52,928.33,048.33,207.0
   Hospital care906.8940.5989.01,035.41,077.61,122.51,192.0
   Professional services757.3793.8843.3893.8937.4979.41,025.9
    Physician and clinical services567.9596.7635.9675.5709.6738.2772.1
    Other professional services78.082.487.492.196.7103.9110.6
    Dental services111.4114.7120.0126.2131.1137.4143.2
   Other health, residential, and personal care144.7152.5165.4175.2185.7191.3193.6
   Home health care80.984.489.994.699.9105.4113.5
   Nursing care facilities and continuing care retirement communities148.6152.2156.2161.4163.4167.2172.7
   Retail outlet sales of medical products370.7410.1442.4453.1464.3482.4509.3
    Prescription drugs262.6298.0324.4329.9337.1349.8369.7
    Durable medical equipment44.946.648.850.952.454.857.6
    Other nondurable medical products63.265.569.372.374.977.782.1
  Government administration37.542.342.845.045.047.348.9
  Net cost of health insurance168.3188.5199.1210.6219.1249.5239.9
  Government public health activities81.584.485.788.492.194.597.8
 Investment163.1159.6164.0167.0181.5190.2201.7
  Noncommercial research46.746.046.447.350.353.656.6
  Structures and equipment116.4113.5117.6119.7131.2136.6145.1
Annual growth
NHE2.7%5.2%5.6%4.6%4.3%4.7%4.6%
 Health consumption expenditures2.95.65.84.84.04.74.5
  Personal health care2.65.26.04.74.14.15.2
   Hospital care3.33.75.24.74.14.26.2
   Professional services1.94.86.26.04.94.54.7
    Physician and clinical services1.95.16.66.25.04.04.6
    Other professional services2.15.66.15.45.07.56.5
    Dental services1.53.04.65.23.94.84.2
   Other health, residential, and personal care4.05.48.45.96.03.01.2
   Home health care3.74.36.45.25.65.57.7
   Nursing care facilities and continuing care retirement communities0.82.42.63.31.22.33.3
   Retail outlet sales of medical products2.610.67.92.42.53.95.6
    Prescription drugs2.213.58.81.72.23.85.7
    Durable medical equipment3.83.64.84.42.94.75.0
    Other nondurable medical products3.23.75.74.33.63.85.6
  Government administration9.712.71.25.20.05.13.5
  Net cost of health insurance4.412.05.65.84.013.9−3.8
   Government public health activities5.63.51.63.24.12.63.5
 Investment0.0−2.22.81.88.74.86.0
  Noncommercial research−3.5−1.40.82.16.26.65.5
  Structures and equipment1.4−2.53.61.89.64.16.3

SOURCE Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group. NOTES Definitions, sources, and methods for NHE categories can be found in Centers for Medicare and Medicaid Services. National Health Expenditure Accounts: methodology paper (see note 21 in text). Numbers might not add to totals because of rounding. Percent changes are calculated from unrounded data.

aAnnual growth, 2012–13.

When broken down by payer, the 4.6 percent rate of increase in total health care spending in 2019 was marked by a slightly faster growth rate in Medicare spending (from 6.3 percent in 2018 to 6.7 percent in 2019), slower growth in private health insurance spending (from 5.6 percent in 2018 to 3.7 percent in 2019), and about the same rate of growth in Medicaid spending (3.1 percent in 2018 compared with 2.9 percent in 2019) (exhibit 1).

The impact of the health insurance tax suspension on Medicare, Medicaid, and private health insurance is evident when comparing growth rates for overall health spending for these payers with the respective growth rates for personal health care spending.4 In each instance, growth in personal health care spending accelerated while growth in overall spending decelerated or accelerated at a slower rate. For Medicare, growth in total expenditures increased by 0.4 percentage points from 2018 to 2019 (from 6.3 percent to 6.7 percent; exhibit 1), whereas growth in the program’s personal health care spending (which excludes government administration and the net cost of health insurance) increased by 1.0 percentage point (from 5.7 percent in 2018 to 6.7 percent in 2019; data not shown). Similarly, overall growth for private health insurance expenditures slowed by 1.9 percentage points in 2019 (3.7 percent compared with a rate of 5.6 percent in 2018; exhibit 1), whereas private health insurance personal health care expenditures experienced a 1.0-percentage-point acceleration in growth (5.4 percent compared with 4.4 percent in 2018; data not shown). In addition, growth in total Medicaid expenditures slowed by 0.2 percentage points in 2019 (2.9 percent compared with 3.1 percent in 2018; exhibit 1), whereas growth for Medicaid personal health care spending accelerated by 1.0 percentage point in 2019 (3.5 percent compared with 2.5 percent in 2018; data not shown).

Revisions To The National Health Expenditure Accounts

The national health spending estimates in this article reflect both routine updates to the estimates, which incorporate new and revised annual data sources that were unavailable for prior releases, and changes that resulted from the comprehensive revision of the National Health Expenditure Accounts. These accounts undergo a comprehensive revision every five years, at which time their concepts, definitions, methods, and data sources are evaluated to ensure that they reflect the most current and complete information available. Before this publication of the 2019 data, the last comprehensive revision occurred with the release of the 2014 National Health Expenditure Accounts. Notable changes in the 2019 accounts are the incorporation of data from the 2017 Economic Census; a modification in source data used for hospital expenditures; and improved methods and data used to estimate spending for other nondurable medical products, retail prescription drugs, and investment in structures and equipment.5

The net impact of these revisions was a decrease in total national health care expenditures of $21.4 billion in 2017, or roughly 0.6 percent.6 Changes related to the comprehensive revision lowered total spending by $25.4 billion in 2017, whereas annual revisions based on more recent and updated source data increased total spending for 2017 by $4.0 billion. Reflecting GDP data that were recently revised upward by $23.6 billion for 2017, the health spending share of GDP for 2017 is now reported as 17.7 percent, down from the previously reported share of 17.9 percent (exhibit 1).

Factors Accounting For Growth

Aggregate national health care expenditures increased 4.6 percent in 2019, or 4.1 percent per capita, similar to the rates of growth in 2018 (exhibit 1). In 2019 growth in per capita health expenditures reflected faster growth in the residual use and intensity of health care goods and services and slower growth in medical prices (as measured by the chain-weighted National Health Expenditures deflator). Growth in the use and intensity of health care goods and services accounted for 2.5 percentage points of the 4.1 percent per capita growth rate, whereas medical price growth accounted for 1.1 percentage points (exhibit 3). Growth in demographic factors accounted for the balance, or 0.5 percentage points.

Exhibit 3 Factors accounting for growth in per capita national health expenditures (NHE), selected calendar years 2004–19

Exhibit 3
SOURCE Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group. NOTES Medical price growth, which includes economywide and excess medical-specific price growth (or changes in medical-specific prices in excess of economywide inflation), is calculated using the chain-weighted NHE price deflator. “Residual use and intensity” is calculated by removing the effects of population, demographic factors (age and time to death), and price growth from the nominal expenditure level.

Medical prices increased 1.1 percent in 2019, which was a slower rate than the 2.3 percent seen in 2018 (exhibit 1) and accounted for 28 percent of per capita growth (exhibit 3). The health insurance tax in 2018 influenced medical price growth in that year, and the suspension of the tax in 2019 contributed to the lower medical price growth in 2019. This impact is reflected in the decline in the growth rate for non–personal health care prices (including those for government administration, the net cost of insurance, public health, and investment); such growth decreased 0.7 percent in 2019 after a strong growth rate of 6.7 percent in 2018. Growth in personal health care prices was similar in both years, at 1.5 percent (data not shown). Economywide price growth slowed from 2.4 percent in 2018 to 1.8 percent in 2019 (exhibit 1).

Residual use and intensity, which reflects changes in the use and mix of health care goods and services, accounted for a 61 percent share of per capita growth in 2019—up from a share of 34 percent in 2018 (exhibit 3).7 The growth rate for residual use and intensity was 2.5 percent in 2019, accelerating from 1.4 percent in 2018. Hospital care, physician and clinical services, retail prescription drugs, and home health care all experienced faster growth in the residual use and intensity of services in 2019.

Demographic factors, which reflect the changing distribution of the population by age and time to death, accounted for a 12 percent share of per capita health expenditures in 2019 and increased 0.5 percent—the same rate of growth as in 2018 (exhibit 3).8,9

Sponsors Of Health Care

In 2019 the federal government and households accounted for the largest shares of national health expenditures (29 percent and 28 percent, respectively), followed by private businesses (19 percent), state and local governments (16 percent), and other private revenues (7 percent) (exhibit 4). The fairly stable growth rate of 4.6 percent in overall national health expenditures in 2019 (exhibit 1) was a result of faster growth in health care spending by the federal government and other private revenues, offset by slower growth in spending by private businesses, state and local governments, and households.

Exhibit 4 National health expenditures (NHE) amounts, annual growth, and percent distribution, by type of sponsor, calendar years 2013–19

Type of sponsor2013a201420152016201720182019
Expenditure amount
NHE, billions$2,859.5$3,008.3$3,177.7$3,324.5$3,465.9$3,629.7$3,795.4
 Businesses, household, and other private revenues1,594.21,645.41,721.81,806.61,901.51,992.72,083.8
  Private businesses559.6580.3598.5629.7660.8698.3724.5
  Household827.6857.2903.4941.9982.61,030.11,076.4
  Other private revenues207.0208.0219.9235.1258.1264.2282.9
 Governments1,265.31,362.91,455.91,517.91,564.41,637.01,711.6
  Federal government760.2843.6916.9960.6988.81,042.21,102.3
  State and local governments505.2519.3539.0557.3575.6594.8609.3
Annual growth
NHE2.7%5.2%5.6%4.6%4.3%4.7%4.6%
 Businesses, household, and other private revenues2.33.24.64.95.34.84.6
  Private businesses0.43.73.25.24.95.73.7
  Household2.93.65.44.34.34.84.5
  Other private revenues5.10.55.76.99.82.47.1
 Governments3.37.76.84.33.14.64.6
  Federal government2.711.08.74.82.95.45.8
  State and local governments4.22.83.83.43.33.32.4
Percent distribution
NHE100%100%100%100%100%100%100%
 Businesses, household, and other private revenues56555454555555
  Private businesses20191919191919
  Household29282828282828
  Other private revenues7777777
 Governments44454646454545
  Federal government27282929292929
  State and local governments18171717171616

SOURCE Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group. NOTES Definitions, sources, and methods for NHE categories can be found in Centers for Medicare and Medicaid Services. National Health Expenditure Accounts: methodology paper (see note 21 in text). Numbers might not add to totals because of rounding. Percent changes are calculated from unrounded data.

aAnnual growth, 2012–13.

For the federal government, spending for health care increased 5.8 percent in 2019, up from a rate of 5.4 percent in 2018 (exhibit 4). The slightly faster growth in 2019 was driven mainly by growth in federal general revenue and Medicare net Trust Fund expenditures (a 32 percent share of federal government health spending), which increased 9.4 percent in 2019 after growth of 6.1 percent in 2018 (data not shown). Faster growth in federal general revenue spending in 2019 was the result of faster growth in overall Medicare expenditures, which are also financed by payroll taxes and premium income. Premium income collected for the Medicare Part B and Part D programs grew at a slower rate in 2019 than in 2018, causing more revenue to be drawn from the general fund. Growth in the federal portion of Medicaid payments (a 35 percent share) and in the payments for other federal health insurance programs (a 23 percent share) also contributed to the acceleration in expenditure growth, as their spending increased 4.1 percent and 5.9 percent, respectively (data not shown).

Health care spending by households increased 4.5 percent in 2019—similar to the rate of 4.8 percent in 2018 (exhibit 4). Out-of-pocket health spending and households’ contributions to employer-sponsored private health insurance premiums accounted for the largest shares of spending in this category, at 38 percent and 27 percent, respectively (data not shown). Out-of-pocket health spending increased 4.6 percent in 2019 after growth of 3.8 percent in 2018 (exhibit 1), whereas households’ contributions to employer-sponsored private health insurance premiums increased 6.3 percent in 2019 compared with growth of 2.9 percent in 2018 (data not shown). Growth slowed for other components of household health spending, offsetting the accelerations in out-of-pocket spending and contributions to private health insurance premiums. These other components include premiums paid by individuals to the Medicare Supplementary Medical Insurance Trust Fund, spending on the medical portion of property and casualty insurance, spending on direct-purchase insurance, and employees’ payroll taxes and voluntary premiums paid to the Medicare Hospital Insurance Trust Fund, which together account for 35 percent of total household health spending (data not shown).

The growth rate for health care spending by private businesses was slower in 2019 (3.7 percent) than in 2018 (5.7 percent) and was the slowest rate of growth since 2015 (exhibit 4). Contributions by private businesses to employer-sponsored private health insurance premiums accounted for the largest share of private businesses’ health spending in 2019 (76 percent); such contributions in 2019 increased 3.9 percent, which was a slower rate than in 2018, when growth was 6.3 percent (data not shown).

Growth in state and local government spending slowed from 3.3 percent in 2018 to 2.4 percent in 2019 (exhibit 4), driven by slower growth in state and local Medicaid spending (a 37 percent share; data not shown). Medicaid state and local spending grew 1.0 percent in 2019, which was a slower rate than in 2018 (2.6 percent) and 2017 (5.4 percent) (exhibit 1). The faster growth in 2017 was attributable in part to the initial requirement that states fund 5 percent of the costs for the expansion population.

Private Health Insurance

Private health insurance expenditures accounted for 31 percent of total national health care spending and reached $1.2 trillion in 2019 (exhibit 1). Spending in this category increased 3.7 percent in 2019, which was a slower growth rate than the 5.6 percent rate seen in 2018. The deceleration in overall private health insurance spending growth was driven by a 7.9 percent decline in the net cost of private health insurance (data not shown)—a decline that resulted primarily from the suspension of the health insurance tax in 2019 (the tax had been reinstated in 2018 after the moratorium in 2017).3

Despite the slowdown in overall private health insurance expenditure growth, spending for medical goods and services (representing 89 percent of total private health insurance spending) grew 5.4 percent in 2019, which was faster than the 2018 growth rate of 4.4 percent. This acceleration reflected faster growth in spending for hospital care, physician and clinical services, and retail prescription drugs. Combined, these three medical goods and service categories accounted for 76 percent of total private health insurance spending in 2019.

Private health insurance enrollment increased slightly in 2019 (0.5 percent; exhibit 5), as small declines in enrollment in Marketplace plans and other directly purchased (non-Marketplace) plans were offset by a 0.7 percent increase in enrollment in employer-sponsored insurance (data not shown). Per enrollee, spending for private health insurance increased 3.2 percent in 2019 and reached $5,927, following growth of 6.4 percent in 2018 (exhibit 5). Again, the reinstatement of the health insurance tax in 2018 and the subsequent moratorium in 2019 contributed to this trend.

Exhibit 5 National health expenditures (NHE) and health insurance enrollment, aggregate and per enrollee amounts, and annual growth, by source of funds, calendar years 2013–19

2013a201420152016201720182019
Private health insurance
Expenditure (billions)$881.3$926.9$981.6$1,039.6$1,091.1$1,152.2$1,195.1
Expenditure growth0.4%5.2%5.9%5.9%5.0%5.6%3.7%
Per enrollee expenditure$4,615$4,760$4,901$5,154$5,400$5,745$5,927
Per enrollee expenditure growth0.4%3.1%3.0%5.1%4.8%6.4%3.2%
Enrollment (millions)191.0194.7200.3201.7202.1200.6201.7
Enrollment growth0.0%2.0%2.9%0.7%0.2%−0.8%0.5%
Medicare
Expenditure (billions)$588.9$617.6$647.8$675.8$704.7$749.1$799.4
Expenditure growth3.6%4.9%4.9%4.3%4.3%6.3%6.7%
Per enrollee expenditure$11,485$11,686$11,933$12,119$12,327$12,767$13,276
Per enrollee expenditure growth0.4%1.7%2.1%1.6%1.7%3.6%4.0%
Enrollment (millions)51.352.854.355.857.258.760.2
Enrollment growth3.2%3.1%2.7%2.7%2.5%2.6%2.6%
Medicaid
Expenditure (billions)$445.2$498.2$542.7$564.8$578.2$596.0$613.5
Expenditure growth5.3%11.9%8.9%4.1%2.4%3.1%2.9%
Per enrollee expenditure$7,536$7,462$7,592$7,689$7,810$8,123$8,485
Per enrollee expenditure growth3.5%−1.0%1.7%1.3%1.6%4.0%4.5%
Enrollment (millions)59.166.871.573.574.073.472.3
Enrollment growth1.7%13.0%7.1%2.7%0.8%−0.9%−1.5%
Uninsured and population
Uninsured (millions)44.135.529.528.729.730.631.8
Uninsured growth−1.4%−19.5%−17.0%−2.8%3.7%2.9%3.8%
Population (millions)b315.4317.8320.0322.4324.5326.1327.7
Population growth0.7%0.7%0.7%0.7%0.6%0.5%0.5%
Insured share of total population86.0%88.8%90.8%91.1%90.8%90.6%90.3%

SOURCE Centers for Medicare and Medicaid Services (CMS), Office of the Actuary, National Health Statistics Group; and Department of Commerce, Census Bureau. NOTES Definitions, sources, and methods for NHE categories can be found in Centers for Medicare and Medicaid Services. National Health Expenditure Accounts: methodology paper (see note 21 in text). Numbers might not add to totals because of rounding. Percent changes are calculated from unrounded data.

aAnnual growth, 2012–13.

bEstimates are explained in the exhibit 1 notes.

Medicare

Medicare spending accounted for 21 percent of total national health care spending and reached $799.4 billion in 2019 (exhibit 1). Total Medicare expenditures (for both the fee-for-service program and Medicare private plans combined) grew 6.7 percent in 2019 compared with growth of 6.3 percent in 2018. Total Medicare enrollment growth remained steady, with the number of enrollees increasing 2.6 percent in both 2018 and 2019 (exhibit 5). Medicare per enrollee spending increased at a slightly faster rate in 2019 (4.0 percent) than in 2018 (3.6 percent), driven by an acceleration in spending growth for such medical goods and services as retail prescription drugs, home health care, and hospital care.

Medicare private plan spending (which accounted for 39 percent of total Medicare expenditures in 2019) increased 14.5 percent in 2019, an acceleration from growth of 12.6 percent in 2018 (data not shown). Since 2004 Medicare private plan spending (which consists mainly of expenditures for Medicare Advantage plans) has increased at a faster annual rate than traditional fee-for-service program spending, as enrollment in these plans has steadily increased more rapidly than enrollment in the fee-for-service program over time. Since 2010 enrollment growth for Medicare private plans has averaged 7.6 percent per year compared with average annual enrollment growth in fee-for-service Medicare of 0.9 percent during the same period. In 2019 specifically, Medicare enrollment in private plans increased 7.7 percent after similar growth of 7.9 percent in 2018. Per enrollee, Medicare private plan spending growth accelerated from 4.3 percent in 2018 to 6.3 percent in 2019 as the impact of the health insurance tax moratorium was more than offset by faster spending growth among all medical goods and services.

Fee-for-service Medicare spending increased 2.2 percent in 2019, which was slower growth than the rate of 3.0 percent seen in 2018. As a share of total Medicare spending (61 percent in 2019), the traditional fee-for-service program decreased substantially from 2016, when it accounted for a 67 percent share. This decrease is a reflection of the diminishing fee-for-service share of total Medicare enrollment over this period (from 68 percent in 2016 to 63 percent in 2019). Growth in per enrollee Medicare fee-for-service spending also slowed in 2019, with expenditures increasing 2.4 percent compared with growth of 3.0 percent in 2018. This deceleration was primarily a result of smaller increases in spending for hospital care (both inpatient and outpatient) and for physician and clinical services, as the two categories together accounted for 66 percent of total fee-for-service Medicare expenditures. Slower growth in inpatient hospital spending reflected declines in use, or discharges per enrollee, in both 2018 and 2019.10 For physician and clinical services, fee-for-service spending growth was slower in part because of slower growth in spending for independent laboratories, physician-administered drugs, and freestanding clinics.10

Medicare spending for government and private plan administration (or the net cost of insurance) also experienced slower growth in 2019. However, despite the elimination of the health insurance tax, spending growth in this category was still relatively strong, at 7.1 percent, following a rate of 15.6 percent in 2018.

Medicaid

Medicaid spending by federal and state and local governments accounted for 16 percent of national health care spending and reached $613.5 billion in 2019. Medicaid spending increased 2.9 percent in 2019 after growing 3.1 percent in 2018 (exhibit 1). The relatively steady growth in 2019 was influenced by faster spending growth for most goods and services and a decline in the net cost of insurance—a decline that was due in part to the health insurance tax moratorium in 2019.

Medicaid spending growth for most medical goods and services accelerated in 2019 compared with 2018. Hospital spending, which accounted for one-third of total Medicaid spending in 2019, increased 4.3 percent in 2019 compared with 2.6 percent in 2018 as a result of faster growth in Medicaid managed care payments. Spending for the second largest category—other health, residential, and personal care services—experienced slower growth in 2019, increasing 1.0 percent (down from a growth rate of 2.6 percent in 2018) as spending for home and community-based waiver services grew more slowly than in the previous year.

Medicaid enrollment growth most recently peaked in 2014, when numerous states expanded eligibility to certain adults, but it has slowed each year thereafter. In 2018 and 2019 Medicaid enrollment is estimated to have decreased 0.9 percent and 1.5 percent, respectively (exhibit 5). These were the first declines in Medicaid enrollment since 2006 and the first two consecutive years of declines since 1996–98. States largely attribute the decreases in Medicaid enrollment—which more than offset the enrollment gains associated with expansion of the program for adults in Virginia and Maine—to improving economic conditions.11

With steady spending growth and a larger decline in enrollment, Medicaid per enrollee spending growth accelerated to 4.5 percent in 2019 from 4.0 percent in 2018—higher growth rates than the average annual rate during 2015–17 (1.5 percent). Many states reported per enrollee growth that was higher in 2019 for certain eligibility groups, including higher-cost populations such as the elderly and people with disabilities.11

Hospital Care

Hospital spending reached $1.2 trillion in 2019 (31 percent of total health care spending) and increased 6.2 percent, which was faster than the 4.2 percent rate of growth experienced in 2018 (exhibit 2). Nonprice factors (such as the use and intensity of services) grew 4.2 percent in 2019 compared with 1.8 percent in 2018 (data not shown); this higher growth rate was driven in part by faster growth in the number of total inpatient days.12 Slower growth in hospital prices partly offset this acceleration, with prices increasing 2.0 percent in 2019 compared with 2.4 percent in 2018.13

Hospital care was largely paid for by private health insurance, Medicare, and Medicaid, which together accounted for 81 percent of all hospital expenditures in 2019. Growth in all three major payers of hospital care accelerated in 2019, contributing to faster overall spending growth. Private health insurance spending for hospital care (a 37 percent share) increased 7.0 percent, the fastest rate of growth since 2015, when spending increased 7.4 percent. Medicare spending for hospital care (a 26 percent share) increased 5.2 percent, whereas Medicaid spending (a 17 percent share) grew 4.3 percent.

Spending for other private revenues (a 7 percent share) increased 13.3 percent in 2019—an acceleration from a growth rate of 3.3 percent in 2018—further contributing to the faster hospital spending growth in 2019.14 Out-of-pocket spending growth also accelerated, from 4.6 percent in 2018 to 7.9 percent in 2019, but this category accounted for only 3 percent of total hospital spending.

Physician And Clinical Services

Spending for physician and clinical services increased 4.6 percent in 2019, reaching $772.1 billion, or 20 percent of total health care expenditures (exhibit 2). This increase followed slower growth of 4.0 percent in 2018 and reversed a recent trend of slowing growth between 2015 and 2018. Nonprice factors (such as the use and intensity of services) were the largest contributor to the acceleration in expenditure growth, as prices for physician and clinical services increased at about the same rate in both 2018 (0.7 percent) and 2019 (0.8 percent).15 Although growth in spending for clinical services continued to outpace growth in spending for physician services in 2019, spending growth for physician services accelerated from 3.3 percent in 2018 to 4.2 percent in 2019, whereas spending growth for clinical services remained relatively steady at 5.8 percent in 2019 compared with a rate of 6.0 percent in 2018.

Faster spending growth for physician and clinical services was driven primarily by accelerations in spending growth for both private health insurance and Medicaid. Private health insurance spending, which accounted for 40 percent of total expenditures for physician and clinical services, experienced a faster growth rate of 3.1 percent in 2019 compared with an increase of 1.9 percent in 2018. Medicaid expenditures accounted for 11 percent of total spending for physician and clinical services, with the program’s spending growth rate increasing to 5.8 percent in 2019 from 4.2 percent in 2018. This acceleration was partly attributable to an increase in the managed care portion of spending for Medicaid physician and clinical services, as well as to an increase in spending for federally qualified health centers.

Two payers of expenditures for physician and clinical services continued recent trends of strong growth. Medicare spending for physician and clinical services (a 25 percent share) grew 8.4 percent in 2019 (similar to the growth rate in 2018 of 8.5 percent), primarily because of strong growth in spending by Medicare private plans (mainly Medicare Advantage plans). Also, although accounting for a smaller share of total spending for physician and clinical services (2 percent), spending by the Department of Veterans Affairs increased considerably in 2019 at a rate of 17.4 percent (after increasing 16.4 percent in 2018). The double-digit growth rates in recent years were due to changes in legislation that aimed to increase access for veterans to health care outside of the Veterans Affairs health care system.16,17

Retail Prescription Drugs

Retail prescription drug spending reached $369.7 billion in 2019 (10 percent of total health care spending) and increased 5.7 percent in 2019, an acceleration from 3.8 percent in 2018 (exhibit 2). The trend in 2019 was influenced by continued strong growth in spending on prescription drugs that are used to treat autoimmune disorders, cancer, and diabetes.18

Faster growth in utilization contributed to the acceleration in total retail prescription drug spending growth. The number of retail prescriptions dispensed (based on a thirty-day supply) grew for the second consecutive year, increasing 3.2 percent after a growth rate of 2.7 percent in 2018.18

Prices for prescription drugs declined 0.4 percent in 2019 after a larger decrease of 1.0 percent in 2018 as price growth slowed for brand-name drugs and declined for generic drugs.19 The generic dispensing rate, which measures the proportion of drugs that are dispensed as generic rather than as brand-name, continued to grow in 2019, reaching 86.3 percent, an increase from 85.5 percent in 2018.20 A continuation of the increase in use of lower-priced generic drugs helped to offset growth in the use of higher-priced brand-name drugs, whose sales accounted for 80.0 percent of total prescription drug revenue in 2019.18 In addition, rebates (which are removed from the estimates of retail prescription drugs, thus lowering total spending) increased at the slowest rate since 2012.21

Private health insurance was the largest payer of retail prescription drug expenditures (a 45 percent share), and spending for this payer increased 6.2 percent in 2019, an acceleration from growth of 5.2 percent in 2018. Medicare, the second-largest payer at 28 percent of total retail prescription drug spending, experienced faster spending growth of 7.6 percent in 2019 after growth of 4.0 percent in 2018. The third-largest payer, out-of-pocket spending, accounted for a 15 percent share of total retail prescription drug spending in 2019. Out-of-pocket spending for retail prescription drugs grew 1.8 percent in 2018 and accelerated to 3.5 percent growth in 2019, reflecting increases in average costs per prescription for cash-paying patients—although these increases were somewhat offset by declining average costs for the insured population, as the use of coupons has helped to lower this group’s out-of-pocket expenses.18

Conclusion

US health care spending increased 4.6 percent in 2019—a similar rate of growth as seen in 2018. The relatively stable growth in overall health care spending in 2019 reflected faster growth in personal health care spending (medical goods and services), which was offset largely by a decline in the net cost of health insurance. Compared with growth in the overall economy, health care spending increased at a faster rate as GDP increased 4.0 percent in 2019. As a result, the health spending share of the economy increased 0.1 percentage point—from 17.6 percent in 2018 to 17.7 percent in 2019.

Health care spending growth has remained relatively stable since 2016, with expenditures increasing at an average annual rate of 4.5 percent. This rate of growth follows a higher average rate of 5.4 percent in 2014 and 2015 as enrollment in Medicaid and private health insurance expanded. Much of the recent increase in health care spending (2014–19) resulted from growth in the use and intensity of medical goods and services, particularly as the insured share of the population increased to 91 percent in 2015 after the coverage expansions and as medical price growth remained low.

The relative stability in health care spending growth in recent years preceded the 2020 global COVID-19 pandemic, which dramatically affected health care and the overall economy. Although the full impact of the pandemic on the health care sector is not yet known, it is certain that it will have profound consequences on the provision and consumption of health care goods and services, as well as on the payers, programs, and sponsors that fund that care in 2020 and perhaps beyond.

ACKNOWLEDGMENTS

The opinions expressed here are the authors’ and not necessarily those of the Centers for Medicare and Medicaid Services. The authors thank the other members of the National Health Expenditure Accounts Team: Joseph Benson, Regina Butler, Bridget Dickensheets, Nathan Espinosa, Heidi Oumarou, Benjamin Washington, and Lekha Whittle. The authors also thank Catherine Curtis, Alyssa Gross, Stephen Heffler, John Poisal, Paul Spitalnic, Christopher Truffer, and the anonymous peer reviewers for their helpful comments. [Published online December 16, 2020.]

NOTES

  • 1 Data from the National Health Expenditure Accounts discussed in this article can be accessed from CMS.gov. Centers for Medicare and Medicaid Services. Historical [Internet]. Baltimore (MD): CMS; [last updated 2020 Dec 16; cited 2020 Dec 16]. Available for download from: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsHistorical Google Scholar
  • 2 This tax, or fee charged to insurance companies that provide health insurance, was statutorily set at $14.3 billion for 2018 and was suspended for 2019.
  • 3 Internal Revenue Service. Affordable Care Act Provision 9010—health insurance providers fee [Internet]. Washington (DC): IRS; [last updated 2020 Aug 21; cited 2020 Nov 9]. Available from: https://www.irs.gov/businesses/corporations/affordable-care-act-provision-9010 Google Scholar
  • 4 The types of private health insurance for which the net cost of insurance is estimated include fully insured group or commercial insurance, direct-purchase or nongroup insurance, and self-insured insurance. Also included in the net cost of insurance are Medicare Advantage and stand-alone Medicare Part D plans, Medicaid managed care plans, Children’s Health Insurance Program managed care plans, the majority of workers’ compensation insurance plans, and the health portion of property and casualty insurance.
  • 5 Centers for Medicare and Medicaid Services. A summary of benchmark changes (2019) is available from CMS.gov. Historical [Internet]. Baltimore (MD): CMS; [last updated 2020 Dec 16; cited 2020 Dec 16]. Available for download from: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsHistorical Google Scholar
  • 6 Although all years back to 1960 were affected by the comprehensive revision, we highlight 2017 in the discussion to show the magnitude of the change in the latest benchmark year—a data point corresponding to the incorporation of the 2017 Economic Census.
  • 7 Growth in the use and intensity of health care goods and services includes changes in both the use and the mix (or intensity) of the goods and services consumed. It is calculated as a residual and reflects growth in nominal health care spending less growth in the population, changes in the demographic mix of the population, and medical price growth. As a residual, use and intensity cannot be estimated separately. The sum of the factors might not equal the total because of rounding.
  • 8 In prior reports, demographic factors reflected the changing distribution of the population by age and sex only. The revised demographic factors reflect age as well as the changing mix of the population on a time-to-death basis, which allows for the demographic adjustment to reflect the increasing life expectancy at any given age.
  • 9 Heffler SK, Caldis TG, Smith SD, Cuckler GA. The long-term projection assumptions for Medicare and aggregate national health expenditures [Internet]. Baltimore (MD): Centers for Medicare and Medicaid Services; 2020 Apr 22 [cited 2020 Nov 9]. Available from: https://www.cms.gov/files/document/long-term-projection-assumptions-medicare-and-aggregate-national-health-expenditures.pdf Google Scholar
  • 10 Boards of Trustees, Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds. 2020 annual report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds [Internet]. Baltimore (MD): Centers for Medicare and Medicaid Services; 2020 Apr 22 [cited 2020 Nov 9]. Available from: https://www.cms.gov/files/document/2020-medicare-trustees-report.pdf Google Scholar
  • 11 Rudowitz R, Hinton E, Diaz M, Guth M, Tian M. Medicaid enrollment and spending growth: FY 2019 and 2020 [Internet]. San Francisco (CA): Henry J. Kaiser Family Foundation; 2019 Oct [cited 2020 Nov 9]. Available from: http://files.kff.org/attachment/Issue-Brief-Medicaid-Enrollment-and-Spending-Growth-FY-2019-2020 Google Scholar
  • 12 Census Bureau. Service Annual Survey tables, latest annual services report [Internet]. Washington (DC): Census Bureau; 2020 Dec 11. Table 13, Estimated inpatient days, outpatient visits, inpatient revenue, and outpatient revenue for employer firms: 2015 through 2019 [cited 2020 Dec 11]. Available for download from: https://www.census.gov/programs-surveys/sas/data/tables.2019.html Google Scholar
  • 13 Bureau of Labor Statistics. Producer Price Index industry data, series report: series ID PCU622---622--- [Internet]. Washington (DC): BLS; [cited 2020 Nov 9]. Available for download from: https://data.bls.gov/cgi-bin/srgate Google Scholar
  • 14 Other private revenues include the medical portion of property and casualty insurance; philanthropic support; investment income; and income from the operation of gift shops, cafeterias, parking lots, and educational programs.
  • 15 Authors’ analysis of Producer Price Index data for North American Industry Classification Codes 6211 and 6215 as of September 2020. See Bureau of Labor Statistics. Producer Price Indexes [Internet]. Washington (DC): BLS; [cited 2020 Nov 13]. Available from: http://www.bls.gov/ppi/ Google Scholar
  • 16 The VA Maintaining Internal Systems and Strengthening Integrated Outside Networks Act of 2018 (the MISSION Act), passed in May of that year, continued the efforts of the Veterans Access, Choice, and Accountability Act of 2014, which was enacted to expand veterans’ access to health care. The goal of the MISSION Act is to consolidate the Department of Veterans Affairs’ “community care programs” into one single program, thereby widening and enhancing veterans’ access to care in the community.
  • 17 Department of Veterans Affairs. FY 2021 Budget Submission. Medical programs and information technology programs [Internet]. Washington (DC): Department of Veterans Affairs; 2020 Feb [cited 2020 Nov 9]. Available from: https://www.va.gov/budget/docs/summary/fy2021VAbudgetVolumeIImedicalProgramsAndInformationTechnology.pdf Google Scholar
  • 18 IQVIA Institute for Human Data Science. Medicine spending and affordability in the U.S.: understanding patients’ costs for medicines [Internet]. Parsippany (NJ): The Institute; 2020 Aug [cited 2020 Nov 23]. Available from: https://www.iqvia.com/insights/the-iqvia-institute/reports/medicine-spending-and-affordability-in-the-us Google Scholar
  • 19 Based on unpublished data from the Bureau of Labor Statistics, Consumer Price Index.
  • 20 Authors’ analysis of unpublished data purchased from IQVIA.
  • 21 For more information on the prescription drug rebate methodology, see Centers for Medicare and Medicaid Services. National Health Expenditure Accounts: methodology paper, 2019 definitions, sources, and methods [Internet]. Baltimore (MD): CMS; 2020 Dec 16 [cited 2020 Dec 16]. Available from: https://www.cms.gov/files/document/definitions-sources-and-methods.pdf Google Scholar
   
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